Lawsuit Seeks $1 Million Penalty And Injunctive Relief

Preet Bharara, the United States Attorney for the Southern District of New York, and Jennifer Shasky Calvery, the Director of the Financial Crimes Enforcement Network (“FinCEN”), announced today that the United States has filed a civil enforcement action against THOMAS E. HAIDER (“HAIDER”), the former Chief Compliance Officer of MoneyGram International, Inc. (“MoneyGram”), for violating the Bank Secrecy Act (“BSA”). At all times relevant to the Complaint, MoneyGram operated a money transfer service that enabled customers to transfer money from one MoneyGram location to another. The Complaint alleges that, notwithstanding his obligations as MoneyGram’s Chief Compliance Officer, HAIDER violated the BSA by failing to ensure that MoneyGram: (1) implemented and maintained an effective anti-money laundering (“AML”) program; and (2) filed timely suspicious activity reports with law enforcement when it knew, suspected, or had reason to suspect that third parties were using its money transfer service to facilitate criminal activity. The Complaint further alleges that, as a result of HAIDER’s conduct, the perpetrators of fraudulent telemarketing and other schemes were able to use MoneyGram’s money transfer system to engage in criminal activity and defraud MoneyGram customers out of substantial amounts of money.

Prior to the filing of the Complaint, FinCEN – which is responsible for enforcing compliance with the BSA – assessed a $1 million penalty against HAIDER for his above-referenced conduct. The Complaint seeks both to collect that assessed penalty and to enjoin Haider from participating, directly or indirectly, in the conduct of the affairs of any “financial institution” (as that term is used in the BSA) that is located in the United States or conducts business within the United States, for a term of years sufficient to prevent future harm to the public.

Manhattan U.S. Attorney Preet Bharara said: “Compliance officers perform an essential function in our society, serving as the first line of defense in the fight against fraud and money laundering. Unfortunately, as the Complaint alleges, Mr. Haider violated his obligations as MoneyGram’s Chief Compliance Officer. By allegedly failing to take the actions clearly required of him under the law, he allowed criminals to use MoneyGram to defraud innocent consumers and then launder the proceeds of their fraudulent schemes. As this case demonstrates, we are committed to working with FinCEN to enforce the requirements of the Bank Secrecy Act and hold individuals such as Mr. Haider accountable.”

FinCEN Director Jennifer Shasky Calvery said: “In my job, I’ve met hundreds of compliance officers and I know them to be some of the most dedicated and trustworthy professionals in the financial industry. FinCEN and our law enforcement partners greatly depend on their judgment and their diligence in our common fight against money laundering, fraud, and terrorist finance. Mr. Haider’s failures are an affront to his peers and to his profession. With his willful violations, he created an environment where fraud and money laundering thrived and dirty money rampaged through the very system he was charged with protecting. His inaction led to personal savings lost and dreams ruined for thousands of victims.”

As alleged in the Complaint, filed today in Manhattan Federal Court:

Since at least 2003, MoneyGram has operated a money transfer service that enables its customers to transfer money to and from various locations in the United States and abroad through its global network of agents and outlets. MoneyGram outlets are independently owned entities that MoneyGram has authorized to transfer money through its money transfer system. Typically, MoneyGram outlets are businesses (such as convenience stores and internet cafes) that offer money transfers through MoneyGram, but primarily provide other types of goods and services. MoneyGram agents are the individuals or entities that own and/or operate MoneyGram outlets.

As a money transmitter, MoneyGram is subject to, and must comply with, various requirements set forth in the BSA and its implementing regulations. As relevant here – and at all times relevant to the Complaint – MoneyGram was required to implement and maintain an effective AML program. MoneyGram was also required to file with FinCEN suspicious activity reports (“SARs”) identifying financial transactions that: (1) were sent by or through MoneyGram; (2) involved (individually or in the aggregate) funds of at least $2,000; and (3) MoneyGram knew, suspected, or had reason to suspect involved, among other things, the use of MoneyGram’s money transfer system to facilitate criminal activity. Such SARs were required to be filed within 30 days of MoneyGram detecting facts that may have constituted a basis for filing the SARs.

From at least 2003 through on or about May 23, 2008, HAIDER was MoneyGram’s Chief Compliance Officer. As such, HAIDER was responsible for ensuring that MoneyGram implemented and maintained an effective AML program and complied with its SAR-filing obligations.

Notwithstanding HAIDER’s obligations as MoneyGram’s Chief Compliance Officer, at all times relevant to the Complaint, HAIDER failed to ensure that MoneyGram (1) implemented and maintained an effective AML program and (2) fulfilled its obligation to file timely SARs. HAIDER’s failures included the following:

Failure to Implement a Discipline Policy. HAIDER failed to ensure that MoneyGram implemented a policy for disciplining agents and outlets that MoneyGram personnel knew or suspected were involved in fraud and/or money laundering.

Failure to Terminate Known High-Risk Agents/Outlets. HAIDER failed to ensure that MoneyGram terminated agents and outlets that MoneyGram personnel understood were involved in fraud and/or money laundering, including outlets that HAIDER himself was on notice posed an unreasonable risk of fraud and/or money laundering. For example, with respect to one such outlet: in 2004, HAIDER learned that the Toronto Police Department regarded the outlet as “dirty”; in 2005, 2006 and 2007, MoneyGram’s Fraud Department – which HAIDER supervised – identified the outlet as one of MoneyGram’s leading fraud outlets; in 2007, MoneyGram’s Fraud Department proposed to HAIDER (and others) that the outlet be terminated, and provided compelling evidence that the outlet was complicit in fraudulent schemes; and by the time Haider left MoneyGram in 2008, MoneyGram had received hundreds of reports from its customers linking the outlet to fraudulent activity.

Failure to File Timely SARs. HAIDER failed to ensure that MoneyGram fulfilled its obligation to file timely SARs, including because: (1) HAIDER maintained MoneyGram’s AML program so that the individuals responsible for filing SARs were not provided with information possessed by MoneyGram’s Fraud Department that should have resulted in the filing of SARs on specific agents or outlets; and (2) HAIDER failed to provide adequate direction to MoneyGram staff regarding when to file SARs relating to fraud.

Failure to Conduct Effective Audits of Agents/Outlets. HAIDER failed to ensure that MoneyGram conducted effective audits of agents and outlets, including outlets that MoneyGram personnel knew or suspected were involved in fraud and/or money laundering.

Failure to Conduct Adequate Due Diligence on Agents/Outlets. HAIDER failed to ensure that MoneyGram conducted adequate due diligence on prospective agents, or existing agents seeking to open additional outlets, which resulted in, among other things, MoneyGram (1) granting outlets to agents who had previously been terminated by other money transmission companies and (2) granting additional outlets to agents who MoneyGram personnel knew or suspected were involved in fraud and/or money laundering.

As a result of HAIDER’s above-described AML failures, agents and outlets that MoneyGram personnel knew or suspected were involved in fraud and/or money laundering were allowed to continue to use MoneyGram’s money transfer system to facilitate their fraudulent schemes. The above-referenced failures continued throughout HAIDER’s employment at MoneyGram, and resulted in MoneyGram’s customers suffering substantial losses, as many were duped into using MoneyGram’s money transfer system to send significant sums of money to the perpetrators of fraudulent schemes.

Mr. Bharara thanked FinCEN for its extraordinary assistance in bringing this case, and its ongoing partnership with this Office in identifying and investigating potential BSA violations.

Mr. Bharara also thanked the Asset Forfeiture and Money Laundering Section of the U.S. Department of Justice, the United States Attorney’s Office for the Middle District of Pennsylvania, and the United States Postal Inspection Service for their assistance in connection with this case.

The case is being handled by Assistant U.S. Attorney Christopher B. Harwood from the Office’s Civil Frauds Unit.